8th Mar 2006 07:02
Hill & Smith Hldgs PLC08 March 2006 PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2005 Hill & Smith Holdings PLC ("the Group") announces a 33.0 per cent rise inunderlying* pre tax profits and a 20 per cent increase in dividends. The Group reports that profit before taxation rose by 56.5% to £15.8 million(2004: £10.1m) and underlying profit before taxation rose 33.0% to £15.7m(£11.8m). Underlying earnings per share increased by 34.7% to 17.92p (2004:13.30p). The proposed final dividend is 3.40p (2004: 2.75p) resulting in total dividendsfor the year of 6.00p (2004: 5.00p). The total dividend for the year is coveredby underlying earnings 3.0 times (2004: 2.7 times). Highlights Year ended Year ended 31 December 2005 31 December 2004 Sales £277.3m £268.7mProfit before taxation £15.8m £10.1mUnderlying profit before taxation* £15.7m £11.8mBasic earnings per share 22.52p 12.16pUnderlying earnings per share* 17.92p 13.30pDividends per share 6.00p 5.00pNet debt £47.3m £37.9mUnderlying net debt+ £22.6m £37.9m * Results stated before reorganisation costs and profit on property disposals.+ Excluding £24.7m of borrowings relating to Zinkinvent investment. Underlying profits advanced in all three of the Group's divisions with aparticularly strong performance from the Infrastructure Products (IPG)businesses. Both Lionweld Kennedy, which was acquired in 2004, and the Group'snew investment in Zinkinvent made good contributions to the trading results. Chief executive David Grove said: "Our programme of capital investment andproduct development continues to pay off, and much of our profit improvementthis year has come from organic growth and productivity gains. We will continueto invest in order to build and sustain competitive advantages in growingmarkets." Further information:Hill & Smith Holdings PLCDavid Grove, Chief Executive0121 704 743007973 325667 Quantum Freshwater UKEdward Carter0121 633 777507770 378097Anna McNeil0121 633 7775 CHAIRMAN'S STATEMENT General I am pleased to report on what has been an outstanding year for the Group. In the year ended 31 December 2005 underlying operating profit increased by29.7% to £19.6 million (2004: £15.1 million) on sales of £277.3 million (2004:£268.7 million). Underlying profit before taxation increased by 33.0% to £15.7million (2004: £11.8 million). The benefits of a capital investment programme of£20 million over the last two years against a corresponding depreciation chargeof £12 million have come through in an improvement in underlying operatingmargins in the current year to 7.1% compared with 5.6% in 2004. Underlyingearnings per share advanced by 34.7% to 17.92p in 2005 (2004: 13.30p). Dividends A final dividend of 3.40p (2004: 2.75p) is proposed. If approved byshareholders, the total dividend for the year will therefore be 6.00p (2004:5.00p), which represents an increase of 20% on the previous year. Dividendpayments and dividend cover have improved consistently over the last five yearsand the current year dividend is now three times covered by underlying earnings. Operations The majority of our profit improvement in 2005 came from organic growth fuelledby our capital expenditure and cost reductions programmes, which are highlyfocused on improving the financial returns of the Group. Both Lionweld Kennedy,which was acquired in 2004, and our new investment in Zinkinvent made goodcontributions to the trading results. Underlying profits advanced in all three of our divisions with a particularlystrong performance from the Infrastructure Products (IPG) businesses. TheBuilding and Construction Products and Industrial Products operations recordedmore modest rises in profitability. Zinkinvent GmbH Investment In May 2005 the Group invested €25 million in cash to acquire a 33% shareholdingin Zinkinvent GmbH ("Zinkinvent") and also advanced to Zinkinvent a loan of €10million. Zinkinvent is a German investment company owning 86% of a BelgianCompany, Vista NV. Vista NV is a galvanizing and lighting pole fabricatingbusiness with significant operations in Benelux, France and the USA with manysimilarities to our existing galvanizing and IPG businesses in the UK. We have representation on both the Zinkinvent and Vista Boards and we aregaining an in depth knowledge of these companies at first hand. I am pleased toreport that the Zinkinvent performance in the second half of 2005 was slightlyahead of our expectations. This investment is being accounted for on an equitybasis as an associate company. As previously announced, we have been carrying out extensive due diligence onZinkinvent and Vista with a view to acquiring the remaining 67% of the issuedshare capital of Zinkinvent. The due diligence process, which is nowsubstantially complete, has identified a number of environmental and otherissues on which the Hill & Smith Board wishes to be satisfied before askingshareholders to approve the acquisition of the outstanding shares. The Board'sobjective remains the acquisition of the whole of Zinkinvent and discussionswith the vendors continue to be actively progressed. Acquisitions In August 2005 we acquired the business and certain of the assets of TechspanSystems Limited, which manufactures and supplies electronic information displaysigns for the road, rail and airport markets. This is an excellent fit with ourIPG businesses, particularly in respect of the road market in the UK and thestrategy of reducing congestion and increasing safety on the national roadnetwork. As anticipated, Techspan incurred a loss during 2005 but its order bookis now increasing and it has re-established itself on a number of public sectortender lists from which it was previously excluded. Since the year end, we havealso acquired Counters & Accessories Limited, which supplies traffic datarecording equipment and which will complement the Techspan business. Employees I would like to thank all our employees for their valuable contribution to theGroup's performance in 2005. Outlook We will continue our strategy of growth by investing in our existing businessesand by acquisition in our core competences where above average growth can beanticipated. The current trading period has started in line with ourexpectations and subject to market conditions remaining favourable, I lookforward to another good performance in 2006. David WinterbottomChairman8 March 2006 OPERATIONAL REVIEW In my operational review accompanying the 2004 accounts I commented that, "Thesignificant advance in profitability in 2004 vindicates our investment strategyin recent years." The record level of profits in 2005 clearly indicates that theGroup's investment strategy continues to deliver shareholder value. Ourconsistent and well-documented strategy remains unchanged and is very focusedgoing forward into 2006. Infrastructure Products Sales increased by 12.2% in 2005 to £107.4 million (2004: £95.7 million) andunderlying operating profit increased by 42.8% to £13.0 million (2004: £9.1million), with a number of companies recording record profits. A number of newproducts were launched during the year and investments in automating ourproduction processes and reducing our unit costs of production have led to asubstantial improvement in the levels of profitability. A number of majorcontracts were won during the year and exports were at a record level. Hill & Smith Limited introduced a new range of vehicle restraint barrier systemsduring the year and its new "Flexbeam" is already regarded as the industrystandard. With increasing emphasis on health and safety on the road network inthe UK our new crash cushion has been well-received as an innovative productresponding to market needs. The Brifen wire rope business also made furtherprogress in the year, with an additional four new countries selling our product.Further investment in our Varioguard temporary crash barrier rental fleet wasrequired during the year in response to an expanding market driven by health andsafety requirements. Large contracts on the M25 around London and the M7 inIreland were the highlights of the year. Berry Systems, which specialises invehicle restraint systems in car parks, had an excellent year and extended itsmarket penetration and product portfolio. Varley & Gulliver introduced its new steel and aluminium parapet vehiclerestraint systems and again recorded an excellent result. Barkers Engineeringimproved its financial performance following significant capital investment;there was a further extension to its product range during the year with theintroduction of a new mesh system. Mallatite's performance was alsosignificantly ahead of the previous year, with major contracts involving thesupply of lighting columns for PFI projects in Sunderland, Manchester andIslington. Despite a slow start to the year, Asset International was one of the companiesto register a record operating profit, helped by its recent investment in newtooling which has increased production capacity. Continued investment in thenation's water infrastructure should provide further growth opportunities forthis business. The Joseph Ash Galvanizing business had to contend with substantial increases inzinc prices and escalating energy costs during the year. We continue toconcentrate our production and service on our more modern and efficient plantsand this resulted in the closure during the year of the facilities at Birminghamand Hartlepool. Although we incurred substantial one-off costs as a result webelieve these closures will have a beneficial effect on our galvanizing businessin future years. Building and Construction Products Underlying operating profit increased by 6.7% to £4.8 million (2004: £4.5million) whereas sales reduced by 1.7% to £131.8 million (2004: £134.1 million). There was an excellent performance from Ash & Lacy Building Systems as a resultof increased sales of new products and improved cross-selling of our productportfolio. Further new product launches are in the pipeline. The industrialflooring and fabricating activities of Redman Fisher responded well to themanagement changes and restructuring which took place in 2004. Lionweld Kennedy,which was acquired in November 2004 and has a well-known brand image, made anexcellent contribution to the group's profits in 2005 representing a verypositive turnaround from its performance prior to its acquisition. ExpressReinforcements had a disappointing year and a demanding restructuring programmehas been put into effect in order to respond to market dynamics and theconclusion of the Terminal Five contract. Birtley Building Products fell alittle short of our expectations during the year but nevertheless performed withmuch credit in a volatile market where we are developing a first-class portfolioto our customer base. The challenge in this division is to improve its operating margins from theircurrent low levels. Industrial Products Underlying operating profit improved by 19.2% to £1.8 million (2004: £1.5million). All the businesses in this division made a positive contributionduring the year with the exception of Ash & Lacy Pressings where action has beentaken to redress the problem. Pipe Supports' results demonstrated a significant improvement over the previousyear following commencement of production from the new factory in Thailand inJanuary. The success of this facility has led us to open a second factory totake advantage of the lower costs of production for our products which are soldworld-wide, particularly into the rapidly-expanding LNG market. Our stockholding operations performed satisfactorily during the year; despitedifficult market conditions we continue to examine product opportunities forenhancing the returns from these businesses. Zinkinvent As expected at the time of the original investment, the Group is now beginningto derive commercial benefits from its association with Zinkinvent. Zinkinventis the holding company of the Vista group which has galvanizing and fabricatingoperations in Benelux, France and the USA. Negotiations are actively continuingwith a view to acquiring the 67% of Zinkinvent which we do not already own. Inthe meantime, the Group has two representatives on the boards of both Zinkinventand Vista and during the period of our investment we have gained a goodunderstanding of the operations of this business. Acquisitions In August 2005 we acquired the operations of Techspan Systems Limited and inFebruary 2006 we completed the purchase of Counters & Accessories Limited. Thesebusinesses are involved in the manufacture of electronic highway information andvehicle logging and detection systems. In common with our more traditionalfabricated product businesses, both these companies supply customers for theroad and infrastructure markets. This marketplace is showing significant growthand we are likely to add to this portfolio in the future as we develop thenecessary technology to supply the demands of the market. Shareholder Value Over the five years to 31 December 2005, the share price of Hill & Smithordinary shares has risen from 65p to 217p, an increase of 233%. This compareswith a decline over this period of 4% in the FTSE All Share Index and anincrease of 2% in the FTSE Small Cap Index. Over the same period totalshareholder return, including dividends, has matched or outperformed both theseindices in four of the five years. The Future We will continue to invest in opportunities which will enhance shareholder valueboth organically and by acquisition. Our product development programme is beingenergetically pursued and new product launches will be evident in 2006. Ourmajor customers are very active in the infrastructure and construction marketsand we are increasingly focusing on products aimed at the health and safety andsecurity demands of this market. Our management teams remain very focused ondelivering high-quality innovative products to our customers and providingvalue-for-money solutions. David GroveChief Executive8 March 2006 FINANCIAL REVIEW Basis of consolidation The results cover the twelve months to 31 December 2005. They include a firstfull year's trading of the Lionweld Kennedy operation which we acquired towardsthe end of 2004. They also include a seven month contribution from ourZinkinvent investment which is being accounted for as an associate. The financial statements, including the prior year comparatives, are presentedfor the first time in accordance with International Financial ReportingStandards. Summary of Results The Group's 2005 results represent another record year with sales, profits andearnings per share all at their highest ever levels. The rapid rise in the costof our major raw material prices that we saw in 2004 abated somewhat, althoughsome of our businesses were affected this year by the significant increase inenergy costs. Nevertheless, and despite volatile market conditions for some ofour businesses, we were able to improve overall operating margins significantly,due in large part to the benefits arising from our programmes of capitalinvestment, business reorganisation and new product development over the pastfew years Sales and Operating Profit Group sales increased by 3.2% to £277.3 million (2004: £268.7 million).Adjusting for the first full year contribution from Lionweld Kennedy,like-for-like growth was 0.5%. Underlying sales in the Industrial Productsdivision were flat but fell by 1.7% in the Building and Construction division,substantially all of the decrease arising in our steel reinforcing operationswhere the Heathrow T5 contract wound down in line with expectations. The mainarea of organic growth was in our core Infrastructure Products Group (IPG)division where sales grew by 12.2%, with only a minor contribution from therecently acquired Techspan business. Underlying operating margins improved in all divisions but particularly in IPG,where they increased from 9.5% to 12.1% and absolute underlying operating profitgrew by 42.8%, fuelled by efficiency improvements, new product launches andstrong market demand both domestically and abroad. The other divisions overalldelivered broadly unchanged like for like performances with most of the profitimprovement attributable to the new Lionweld Kennedy Flooring business. Groupunderlying operating profit increased by 29.7% to £19.6 million (2004: £15.1million). Net reorganisation and property items at operating profit level amounted to £0.1million. These include the cost of relocating galvanizing production at bothBirtley Building Products and Joseph Ash, which involved the closures offactories at Hartlepool and Digbeth, and a reorganisation at ExpressReinforcements where we carried out a major management and operationalrestructuring, including the closure of their Rainham depot. These costs wereoffset by profits on various property transactions, mainly the sale of thevacant sites at Wombwell and Digbeth and three sale and leaseback transactionscovering five Group operating properties. These transactions generated total netproceeds of £13.8 million which will be used to help finance the Group'sinvestment and acquisition programmes. Taken together with the resultantinterest savings, these transactions will have a broadly neutral effect onannual future earnings. Income from our investment in Zinkinvent GmbH amounted to £0.7 million which, inaccordance with the requirements of international accounting standards, isstated after interest and tax even though included at the operating profitlevel. Taking into account the interest cost on the related new borrowings, thisinvestment made a small net contribution to the year's earnings. Financing costs Net financing costs increased by £0.6 million, primarily as a result of theborrowings we took on to finance the Zinkinvent investment and the heavy capitalinvestment programme. The sale and leaseback transaction came too late in theyear to have any material effect on the year's interest costs. Underlying netinterest cover improved to 5.1 times (2004: 4.6 times). Profit before taxation Underlying profit before taxation rose by 33.0 % to a record £15.7 million(2004: £11.8 million). Including the effect of the net reorganisation andproperty items, profit before taxation increased by 56.5% to £15.8 million(2004: £10.1 million). Taxation The effective tax rate on underlying profits was 28.0% compared to the standardrate of 30%. This was due mainly to the benefit of tax relief on employee shareoption gains and the inclusion of the Zinkinvent post tax profits at the pre taxlevel. There was also a very significant overall tax credit arising on the netreorganisation and property items where we were able to shelter the profitsarising on the property transactions. Financing Year end net borrowings increased to £47.3 million (2004: £37.9 million). Themain cause of the increase was the £24.7 million of new Euro denominated debtwhich we took on to finance the investment in our associated company, ZinkinventGmbH. Excluding these new borrowings, underlying net debt reduced by £15.3million during the year. We took out an interest swap to fix the borrowing costson these new borrowings until 30 June 2007 pending conclusion of negotiationswith the vendors. We continued our vigorous programme of capital expenditure, investing a total of£12.3 million, including £1.5 million on new product development costs. Propertytransactions during the year generated £13.8 million and tight management ofworking capital enabled us to generate a further £3.0 million, although this wasimpacted by a decrease during the year in the level of advance payments receivedin connection with our Terminal 5 Joint Venture. Pensions In line with the experience of most UK companies, there was an increase in thelevel of our year end net retirement benefit obligation. Although investmentreturns during the year exceeded expectations they were outweighed by improvedmortality rates and the significant reduction in long term interest rates. Earnings per share Underlying earnings per share amounted to 17.92p, an increase of 34.7% over lastyear and the highest ever achieved by the Group. Basic earnings per share grewby 85.2% to 22.52p which was also a record. Dividends In line with our progressive dividend policy, we again propose to increase thelevel of the distribution to shareholders. The recommended final dividend,together with the interim dividend already paid, makes a total for the year of6.00p per share, an increase of 20.0% over last year. Based on underlyingearnings, this level of dividend is covered 3.0 times (2004: 2.7 times). Chris BurrFinance Director8 March 2006 CONSOLIDATED INCOME STATEMENTYear ended 31 December 2005 Year ended 31 December 2005 Year ended 31 December 2004 Reorganisation Reorganisation Underlying and property Underlying and property results items Total results items Total Notes £000 £000 £000 £000 £000 £000------------------------------------------------------------------------------------------------------------------------Sales 1 277,296 - 277,296 268,652 - 268,652========================================================================================================================Trading profit 18,893 - 18,893 15,084 - 15,084Income from associated company 2 677 - 677 - - -Business reorganisation costs 3 - (4,260) (4,260) - (1,460) (1,460)Special bonus and associated costs - - - - (424) (424)Profit on sale of properties 3 - 4,389 4,389 - 187 187------------------------------------------------------------------------------------------------------------------------Operating profit 1 19,570 129 19,699 15,084 (1,697) 13,387Financial income 4,294 - 4,294 3,493 - 3,493Financial expense (8,166) - (8,166) (6,770) - (6,770)------------------------------------------------------------------------------------------------------------------------Profit before taxation 15,698 129 15,827 11,807 (1,697) 10,110Taxation 4 (4,397) 2,766 (1,631) (3,554) 991 (2,563)------------------------------------------------------------------------------------------------------------------------Profit for the year 11,301 2,895 14,196 8,253 (706) 7,547========================================================================================================================Attributable to:Equity holders of the parent - - 14,176 - - 7,539Minority interest - - 20 - - 8------------------------------------------------------------------------------------------------------------------------Profit for the year - - 14,196 - - 7,547======================================================================================================================== Basic earnings per share 5 - - 22.52p - - 12.16pDiluted earnings per share 5 - - 21.82p - - 11.63p Dividend per share - Interim 6 - - 2.60p - - 2.25pDividend per share - Final proposed 6 - - 3.40p - - 2.75p------------------------------------------------------------------------------------------------------------------------Total 6 - - 6.00p - - 5.00p======================================================================================================================== CONSOLIDATED BALANCE SHEETAs at 31 December 2005 31 December 31 December 2005 2004 Notes £000 £000--------------------------------------------------------------------------------Non-current assetsIntangible assets 29,727 28,144Property, plant and equipment 40,972 44,431Investments in associates 2 24,832 -Deferred tax asset 2,407 --------------------------------------------------------------------------------- 97,938 72,575--------------------------------------------------------------------------------Current assetsAssets held for sale - freehold land 631 1,746Inventories 24,804 27,004Trade and other receivables 61,057 58,002Cash and cash equivalents 7 16,313 9,901-------------------------------------------------------------------------------- 102,805 96,653--------------------------------------------------------------------------------Total assets 1 200,743 169,228================================================================================Current liabilitiesTrade and other liabilities (79,528) (75,596)Current tax liabilities (2,088) (2,471)Interest bearing borrowings 7 (8,162) (11,806)-------------------------------------------------------------------------------- (89,778) (89,873)--------------------------------------------------------------------------------Net current assets 13,027 6,780================================================================================Non-current liabilitiesTrade and other liabilities (427) -Provisions for liabilities and charges (833) (1,629)Deferred tax liability - (797)Retirement benefit obligation (13,885) (6,642)Interest bearing borrowings 7 (55,408) (36,003)-------------------------------------------------------------------------------- (70,553) (45,071)--------------------------------------------------------------------------------Total liabilities 1 (160,331) (134,944)================================================================================Net assets 1 40,412 34,284================================================================================ EquityShare capital 15,799 15,519Share premium 4,036 3,519Capital redemption reserve 238 238Other reserves 4,313 4,313Translation reserve (38) (56)Equity reserves 15,994 10,701--------------------------------------------------------------------------------Equity attributable to equity holders of the parent 40,342 34,234Minority interests 70 50--------------------------------------------------------------------------------Total equity 40,412 34,284================================================================================ CONSOLIDATED STATEMENT OF CASH FLOWSYear ended 31 December 2005 Year ended Year ended 31 December 31 December 2005 2004 Notes £000 £000 £000 £000------------------------------------------------------------------------------------------------------------------------Operating profit 1 - 19,699 - 13,387Adjusted for non cash items Income from associated company (677) - - - Share-based payment 100 - - - Gain on disposal of property, plant and equipment (4,396) - (223) - Depreciation 6,012 - 5,522 - Amortisation of intangible assets 183 - 63 - ======== ======== - 1,222 - 5,362 -------- - --------Operating cash flow before movement in working capital - 20,921 18,749Decrease/(Increase) in inventories 2,616 - (2,438) -Increase in receivables (2,195) - (10,667) -Increase in payables 2,591 - 11,842 - ======== ========Net movement in working capital - 3,012 - (1,263) -------- --------Cash generated by operations 1 - 23,933 - 17,486Income taxes - (2,727) - (2,259)Interest paid - (4,676) - (3,603)------------------------------------------------------------------------------------------------------------------------Net cash from operating activities - 16,530 - 11,624 Interest received 455 - 95 -Proceeds on disposal of property, plant and equipment 13,788 - 526 -Purchase of property, plant and equipment (10,776) - (7,814) -Purchase of intangible assets (1,506) - (432) -Acquisitions of subsidiaries and associates (25,219) - (2,533) - ======== ========Net cash used in investing activities - (23,258) - (10,158)Issue of new shares 797 - 191 -Dividends paid (3,134) - (2,846) -New loans raised 25,516 - 2,946 -Repayments of loans (7,750) - (4,250) -Repayment of loan notes (1,030) - (827) -Repayment of obligations under finance leases (1,259) - (1,102) - ======== ========Net cash from/(used in) financing activities - 13,140 - (5,888)------------------------------------------------------------------------------------------------------------------------Net increase/(decrease) in cash - 6,412 - (4,422)Cash at the beginning of the year - 9,901 - 14,323------------------------------------------------------------------------------------------------------------------------Cash at the end of the year 7 - 16,313 - 9,901======================================================================================================================== CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSEYear ended 31 December 2005 Year ended Year ended 31 December 31 December 2005 2004 £000 £000--------------------------------------------------------------------------------Exchange differences on translation of foreign operations 18 34Actuarial loss on defined benefit pension schemes (8,094) (3,920)Deferred tax on items taken directly to equity 2,173 904Current tax on items taken directly to equity 255 272--------------------------------------------------------------------------------Net expense recognised directly in equity (5,648) (2,710)Profit for the year 14,196 7,547--------------------------------------------------------------------------------Total recognised income and expense for the year 8,548 4,837================================================================================Attributable to:Equity holders of the parent 8,528 4,829Minority interest 20 8--------------------------------------------------------------------------------Total recognised income and expense for the year 8,548 4,837================================================================================ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. Segmental information The Group is currently organised into three main operating segments which represents its primary segment information. All operations are continuing: Income Statement Year ended 31 December 2005 Year ended 31 December 2004 Underlying Underlying Operating operating Operating operating Sales profit profit* Sales profit profit* £000 £000 £000 £000 £000 £000------------------------------------------------------------------------------------------------------------------------ Infrastructure Products + 107,414 11,872 13,003 95,729 8,274 9,103 Building and Construction Products 131,797 4,353 4,816 134,120 3,834 4,512 Industrial Products 38,085 3,474 1,751 38,803 1,279 1,469 --------------------------------------------------------------------------------------------------------------------- Total Group 277,296 19,699 19,570 268,652 13,387 15,084 ========================================================= ========= Net financing costs (3,872) (3,872) (3,277) (3,277) ------------------- ------------------- Profit before taxation 15,827 15,698 10,110 11,807 Taxation (1,631) (4,397) (2,563) (3,554) -------------------------------------------------------------------------------------------------------------------- Profit after taxation 14,196 11,301 7,547 8,253 ==================================================================================================================== * Underlying operating profit is stated before reorganisation and property items. + Includes £677,000 income from associated company Balance Sheet Year ended 31 December 2005 Year ended 31 December 2004 Total Total Total Total assets liabilities assets liabilities £000 £000 £000 £000 --------------------------------------------------------------------------------------------------------------------- Infrastructure Products + 94,993 (20,918) 69,916 (21,535) Building and Construction Products 55,289 (33,973) 58,671 (33,571) Industrial Products 31,741 (18,050) 30,740 (16,564) --------------------------------------------------------------------------------------------------------------------- Total operations 182,023 (72,941) 159,327 (71,670) Tax and dividends 2,407 (9,102) - (7,194) Non-current items - (14,718) - (8,271) Net debt 16,313 (63,570) 9,901 (47,809) --------------------------------------------------------------------------------------------------------------------- Total Group 200,743 (160,331) 169,228 (134,944) ===================================================================================================================== Net assets - 40,412 - 34,284 ===================================================================================================================== + Includes £24.8m investment in associated company Cash Flows Year ended 31 December 2005 Year ended 31 December 2004 Underlying Underlying Cash flow cash flow* Cash flow cash flow* £000 £000 £000 £000 --------------------------------------------------------------------------------------------------------------------- Infrastructure Products 10,826 12,846 10,133 10,956 Building and Construction Products 10,087 11,282 5,112 5,794 Industrial Products 3,020 3,346 2,241 2,427 --------------------------------------------------------------------------------------------------------------------- Cash generated by operations 23,933 27,474 17,486 19,177 ===================================================================================================================== * Underlying cash flow is stated before reorganisation and property items. 2. Income from associated company In May 2005 the Group invested €35 million (€25 million to acquire 33% of the ordinary shares and a €10 million loan) in Zinkinvent GmbH, a German holding company which owns 86% of Vista NV, a Belgian company with galvanizing and lighting pole fabrication businesses in Benelux, France and the United States of America. The results of this business are being equity accounted into the results of the Group. The Group's share of the post acquisition profit of Zinkinvent GmbH for the year ended 31 December 2005, which is stated net of local income tax, was £677,000 (2004: £Nil). 3. Reorganisation and property items Business reorganisation costs These relate primarily to the costs of relocating galvanizing production from the Digbeth operation of Joseph Ash Limited and the Hartlepool operation of Birtley Building Products Limited to alternative locations, and the costs arising from the restructuring of Express Reinforcements Limited including the closure of its Rainham depot. Profit on sale of properties These relate to the sale of two vacant properties and the sale and leasebacks of five other operating properties. No tax liability arises on the profit on these sales due to the availability of indexation allowances and capital losses. There is a deferred tax benefit of £1,363,000 relating to the grant of subordinate lease interests. 4. Tax on profit Year ended Year ended 31 December 31 December 2005 2004 £000 £000-------------------------------------------------------------------------------- Current tax UK corporation tax at 30% (2004: 30%) 2,519 2,558 Adjustments in respect of prior periods (30) - Foreign tax at prevailing local rates 110 39-------------------------------------------------------------------------------- 2,599 2,597 Deferred tax Current year (980) 128 Adjustments in respect of prior periods 12 (162)-------------------------------------------------------------------------------- Tax on profit in the Income Statement 1,631 2,563================================================================================ The tax charge for the period is lower than the standard rate of corporation tax in the UK. The differences are explained below: Year ended Year ended 31 December 31 December 2005 2004 £000 £000-------------------------------------------------------------------------------- Profit before taxation 15,827 10,110================================================================================ Profit on ordinary activities multiplied by the standard rate of corporation tax in the UK of 30% 4,748 3,033 Expenses not deductible for tax purposes 360 301 Deductible employee share option gains not charged against profit (309) (412) Income from associated companies already taxed (203) - Capital profits less losses and write downs not subject to tax (1,526) (98) Deferred tax benefit arising from asset disposals (1,363) (110) Overseas profits taxed at lower rates (58) (35) Overseas losses not relieved - 46 Adjustments in respect of previous periods (18) (162) ------------------------------------------------------------------------------- Tax charge 1,631 2,563 ------------------------------------------------------------------------------- In addition to the deferred tax credit in the Income Statement deferred tax of £63,000 (2004: £Nil) has been credited direct to equity relating to share based payments. 5. Earnings per share The weighted average number of shares in issue during the year was 62,960,978 (2004: 61,999,081), diluted for the effects of outstanding share options 64,968,617 (2004: 64,805,705). Underlying earnings per share have been shown because the Directors consider that this gives a more meaningful indication of the underlying performance of the Group. Year ended Year ended 31 December 2005 31 December 2004 Pence per Pence per Share £000 Share £000 --------------------------------------------------------------------------------------------------------------------- Basic earnings 22.52 14,176 12.16 7,539 Less effect of reorganisation and property items 4.60 2,895 (1.14) (706) --------------------------------------------------------------------------------------------------------------------- Underlying earnings 17.92 11,281 13.30 8,245 ===================================================================================================================== Diluted earnings 21.82 14,176 11.63 7,539 Less effect of reorganisation and property items 4.46 2,895 (1.09) (706) --------------------------------------------------------------------------------------------------------------------- Underlying diluted earnings 17.36 11,281 12.72 8,245 ===================================================================================================================== 6. Dividends Dividends declared after the balance sheet date are not recognised as a liability, in accordance with IAS10. The Directors have recommended a final dividend for the current year, subject to shareholder approval, as shown below. The Directors feel it is important that this information be disclosed even though the recommended figure no longer forms part of the financial statements under International Accounting Standards. Year ended Year ended 31 December 2005 31 December 2004 Pence per Pence per Share £000 Share £000 --------------------------------------------------------------------------------------------------------------------- Equity shares: Interim 2.60 1,643 2.25 1,397 Final proposed 3.40 2,149 2.75 1,737 --------------------------------------------------------------------------------------------------------------------- Total 6.00 3,792 5.00 3,134 ==================================================================================================================== 7. Cash and borrowings Year ended Year ended 31 December 31 December 2005 2004 £000 £000-------------------------------------------------------------------------------- Cash Cash and bank balances 2,271 7,322 Call deposits 14,042 2,579-------------------------------------------------------------------------------- 16,313 9,901 Interest bearing loans and borrowings Amounts due within one year (8,162) (11,806) Amounts due after more than one year (55,408) (36,003)-------------------------------------------------------------------------------- Net debt (47,257) (37,908) Add back borrowings taken on to finance the investment in Zinkinvent GmbH 24,654 --------------------------------------------------------------------------------- Underlying net debt (22,603) (37,908)================================================================================ 8. Adoption of International Financial Reporting Standards In accordance with the European Union Regulation issued in 2002, the Company's consolidated results for the year ending 31 December 2005, including the prior year comparatives, have been prepared on the basis of International Financial Reporting Standards. 9. Subsequent events In February 2006 the Group acquired the entire share capital of Counters & Accessories Limited for a cash consideration of £5 million. Notes 1. The financial information set out above does not constitute the company's statutory accounts for the years ended 31 December 2005 or 2004. Statutory accounts for 2004, which were prepared under UK GAAP, have been delivered to the registrar of companies, and those for 2005, prepared under accounting standards adopted by the EU, will be delivered in due course. The auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their reports, and (iii) did not contain statements under section 237(2) or (3) of the Companies Act 1985. 2. The proposed final dividend will be paid on 12 July 2006 to shareholders on the register on 9 June 2006 (ex-dividend date 7 June 2006). 3. The Annual Report will be posted to shareholders on 6 April 2006, and will be displayed on the Company's website at www.hsholdings.co.uk. Copies of the Annual Report will also be available from the Registered Office at 2 Highlands Court, Cranmore Avenue, Shirley, Solihull, B90 4LE. 4. The Annual General Meeting will be held at The Balcony Suite, The National Motorcycle Museum, Solihull at 10.30 a.m. on Friday 12 May 2006. Financial calendar: Annual General Meeting 12 May 2006 Payment of proposed final dividend 12 July 2006 Interim results announcement for the period to 30 June 2006 September 2006 Payment of interim dividend January 2007 5. This preliminary announcement of results for the year ended 31 December 2005 was approved by the Directors on 8 March 2006. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Hill & Smith